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BOK Financial Reaffirmed at Neutral

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On Jun 25, 2013, we reiterated our long term Neutral recommendation on BOK Financial Corp. (BOKF - Analyst Report) primarily based on its improved credit quality metrics and prudent expense management. However, declining revenues were the downside.

Why Neutral?

Despite the macroeconomic pressure, BOK Financial’s credit quality continues to normalize. Credit metrics consistently improved in 2012 as the overall financial condition of businesses and consumers strengthened and the housing market improved in many areas. Going forward, we expect asset quality to improve.

BOK Financial’s first-quarter earnings of $1.28 per share beat the Zacks Consensus Estimate as well as the prior-quarter figure by 6%. Reduced net charge-offs and strong capital ratios were the positives for the quarter.

We are also impressed with the company’s strategic acquisitions in the economically diverse markets, constituting the Southwest, Midwest and Rocky Mountain states. Notably, 64% of BOK Financial’s consolidated net income for the first quarter of 2013 was derived from overseas markets.

Over the last 60 days, the Zacks Consensus Estimate for 2013 moved north by 4% to $4.88. For 2014, the Zacks Consensus Estimate rose 3% to $4.80 over the same time period. As a result, BOK Financial currently carries a Zacks Rank #2 (Buy).

However, we are concerned about the company’s top-line growth and margins, which continue to be impacted by the low rate environment and sluggish economic recovery. Additionally, regulatory issues are expected to limit the company’s flexibility with respect to business investments.

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